That was the sales pitch from the Mayor, but then reality set in...
Baltimore Brew - News and Views in Baltimore
It’s now official: sagging casino revenues equal no property tax cut this year ANALYSIS: The mayor, who promised tax breaks for homeowners from casino revenues, now calls for a "pause" as first-year Horseshoe lease payments tank
Mark Reutter April 13, 2015
During her 2011 election campaign, Mayor Stephanie Rawlings-Blake promised that ground-lease revenues from a proposed casino would bankroll property tax reductions for Baltimore homeowners for years to come.
Calling it her “Fiscal [sic] Responsible Plan,” she pledged to dedicate 90% of the casino’s lease payments to property tax relief.
Back then, the casino site was a remediated hazardous waste zone long occupied by a chemical company.
The city had purchased the property on a desolate stretch of Russell Street. Shortly before Caesars Entertainment submitted its winning bid to state authorities, the mayor’s campaign committee received a $4,000 contribution, the maximum allowed by law, from the Las Vegas gambling giant.
Counting Your Chickens
Now four years later, Caesar’s debt-ridden parent company is in bankruptcy court, and homeowners won’t get a property rate reduction because the pot of gold the administration had anticipated from the casino hasn’t materialized.
That’s right: City Hall had wagered that the casino would bring $14.8 million in ground-lease payments in the current (2015) fiscal year, which would in turn bankroll “a 5-cent property tax reduction on the Baltimore City tax rate in year one,” according to the agreement Mayor Rawlings-Blake signed with Caesars on October 31, 2012.
Trouble is that the casino has grossly underperformed since it opened last August.
The facility is producing a third less revenues than expected. Not only has this shortfall undercut “local impact grants” slated for South Baltimore communities to mitigate the negative effects of the casino (crime, prostitution, traffic congestion, etc.), but it has turned the mayor’s “20 cents by 2020″ property tax relief plan for homeowners on its head.
Casino revenues are coming in so low, in fact, that they have triggered a clause in the ground lease that requires a “minimum payment” of $8 million in “year one” if the city’s 2.99% share of total gambling revenues doesn’t reach that threshold.
Digging a $10 Million Hole
A year ago, the Baltimore Development Corporation, which structured the casino deal, pooh-poohed the very thought that lease revenues would come in below the $8 million minimum. But they have and – worse from the standpoint of taxpayers – the casino has been allowed by the city’s finance department to delay part of this minimum payment.
Here is the explanation by Budget Director Andrew Kleine for why Horseshoe Casino will only pay $4 million of the $8 million minimum due in the current fiscal year:
Because Horseshoe didn’t open its doors until August 26, 2014 – or seven weeks after the start of the current fiscal year – the casino’s second installment of $4 million for “year one” isn’t expected until fiscal 2016.
So, already, the casino is slipping behind in its minimum tax payments – compare that to your tax bill that must be paid in advance to avoid penalties – leaving a $10 million hole in the current city budget.
Pausing the Tax Cut
Rather than fess up to this shortfall, Mayor Rawlings-Blake is attempting to finesse the matter.
Last week she wrote in The Baltimore Sun that because her “20 cents by year 2020″ tax reduction plan is ahead of schedule, “my finance department. . . recommends a one-year pause” in homeowner tax cuts in 2016.
A more accurate description of what is going on comes from Kleine. He told reporters this: “We’re half way through the eight years of the ’20 cents by 2020,’ and we’re at about 60% of the goal of getting to that 20 cent reduction. The casino revenue has not been that strong. . . So more of the cost of tax relief is having to be absorbed elsewhere” [our emphasis].
The bottom line is that Baltimore’s notoriously high taxes will remain at their current $2.130 per $100 of assessed value in 2016 for homeowners – and $2.248 for all others.
That’s more than twice the rate of Baltimore County, Anne Arundel County and other surrounding jurisdictions.
The mayor (who has praised the casino as one of Baltimore’s future “anchor institutions,” along with universities and hospitals) says the one-year “pause” won’t be permanent.
But there are several factors that make it hard to conceive how the casino will play a significant role in lowering the tax rate in future years.
More Competition Coming
For one thing, the casino has gained little or no traction against its nearest competitor. Maryland Live at Arundel Mills has consistently earned higher revenues than Horseshoe. (Last month, Maryland Live grossed $52 million vs. $24.7 million at Horseshoe.)
For another, a $1.2 billion gaming resort is looming at National Harbor in Prince George’s County.
Scheduled to open next year, the lavish MGM casino-hotel-mall-spa is undoubtedly going to peel away customers in the D.C.-Virginia market who now are coming to gamble in Baltimore. The only question is how many patrons, and how much their absence will take revenues, and possibly jobs, away from Horseshoe.
So far, Horseshoe’s effort to grow its revenues incrementally by adding table games has not produced solid gains based on the monthly statistics compiled by the Maryland Gaming Board. In fact, slots are holding their own, while table games have yet to catch fire (here and here).
As warm weather approaches, the casino is expected to attract more customers and, over time, Caesars’ Total Awards customer loyalty program might squeeze more casino dollars from gamblers.
But will there be enough dollars to meet the lease agreement? According to its terms, Horseshoe is expected to pay Baltimore a guaranteed minimum of $10 million in “year two” of operations – or $2 million more than this year.
Then $12 million in year three (fiscal 2017), $13 million in year four (fiscal 201, and $14 million in year five (2019) and thereafter.
The final scheduled amount is almost double what the casino is now struggling to pay – and it represents the jackpot the Rawlings-Blake administration was counting on to underwrite homeowner property tax reductions through 2020.
Grand Prix Redux?
So the real question is whether these future escalating minimum payments are realistic.
Will the Caesars group – which includes such politically-wired local investors as Caves Valley Partners, developer Theo Rodgers, money manager Eddie Brown, and the Stronach family of Pimlico Race Course – have the cash?
Or will they come back to City Hall and renegotiate the terms of the lease?
And what about the $4.7 million the group owes Baltimore for the land on Warner Street used for Horseshoe’s parking garage? That lump-sum payment is due on October 31, 2017 – or five years after the city sold the land to Caesars for just 20% ($1.2 million) down.
In the context of other city-initiated ventures that have been permanently “paused” (the Grand Prix) or are springing financial leaks (the Hilton Hotel), taxpayers may well rue the day that some smooth-talking suits from Vegas, peddling a sure bet, were welcomed to town.
Bangor’s relationship with casino tested by taxes, revenue sharing
By Evan Belanger, BDN Staff Posted May 07, 2015, at 5:40 a.m.
BANGOR, Maine — Hollywood Casino plays a significant role in the city of Bangor’s finances. It pays more property taxes than any other entity, as well as a portion of the city’s debt for the Cross Insurance Center.
This relationship could be tested, given the casino’s Jan. 9 request for a $36.8 million reduction of its property value, the second tax break sought by the casino since 2009.
If approved, the city would repay $876,840 of the $2.6 million in property taxes already paid by the casino for 2014.
While the city considers this request, it also is dealing with a declining share of the casino’s gaming revenue — down 19.5 percent over the past two years. The city relies on that revenue to help pay the $3 million annual debt service payments for the Cross Center.
An official with Hollywood Casino said the gaming operation’s request for a tax abatement is not a sign the casino is struggling, but he also acknowledged the economy remains soft and competition has increased.
Nearly 130 miles away, competing Oxford Casino continues to snag more gaming revenue than the Bangor gambling establishment.
“Just like all businesses in Maine, we are managing continued softness in the economy with increased competition, so we have to tighten our belt and stay focused on our bottom line,” Hollywood Casino General Manager Jose Flores said. “But Hollywood Casino remains healthy, and it is business as usual.”
Flores attributed the abatement request primarily to the increase in assessed value applied by the city for the 2014 tax year.
The city increased its assessment of the casino’s fair market value by 3.6 percent in the 2014 tax year, from $94.8 million in 2013 to $98.2 million.
Under state law, City Assessor Phil Drew has until May 9 to issue a written decision on the request. He also could ignore the request, which would result in an automatic denial.
Drew would not comment this week on the reason for the increased valuation but said he plans to issue a written decision instead of letting the request die without a response.
He is expected to deny the request, as the City Council already hired outside legal counsel to represent its interest in the tax dispute.
Voting unanimously April 27, the City Council ratified an agreement with the Kennebunkport-based Jensen, Baird, Gardner and Henry law firm for legal services related to the abatement request at an estimated cost of $20,000 in order to represent the city’s interest in the tax dispute.
Drew would not comment on the particulars of the dispute, but he advised the council’s Finance Committee on April 22 that he was “comfortable that the assessment is fair and equitable” and that his office would “like to move toward a vigorous defense.”
“My opinion would be, given the value that’s been invested in the Cross Center, in the new hotel, in the waterfront, the value should have at least stayed the same, if not increased,” Councilor Ben Sprague said at the time.
If the casino disagrees with Drew’s decision, it can appeal to the city’s Board of Assessment Review for a hearing.
Abatement requests are not particularly unusual in Bangor, according to city officials. Drew estimated that, on average, his department gets 10 to 12 formal abatement requests annually.
In its latest request, Hollywood alleged the city’s assessment overvalued the casino properties.
The casino has engaged a U.S. branch of Ernst & Young Global Ltd., the third largest financial auditing firm in the world. Its services include tax consulting and advising.
Flores said the casino is “relying on their expertise” in valuation matters.
Meanwhile, city records show that in the 2009 tax year — before Drew served as city assessor — the city granted Hollywood Casino a $16.1 million reduction in its property valuation, cutting its estimated fair market value from $100.7 million to $84.6 million.
Under the tax rate at the time, that was equal to $307,101 in property taxes abated by the city. That abatement request did not go to the appeals board.
Drew said he could not comment on why former City Assessor Ben Birch approved that request. The Bangor Daily News has requested a copy of the casino’s request for that abatement under the Maine’s Freedom of Access Act.
Despite the abatement, Hollywood Casino’s two local property holding companies, GLP Capital LP and HC Bangor LLC, remained the first and the fifth highest property taxpayers in the city in fiscal 2014, shelling out a combined $2.6 million in personal and real property taxes, according to city records.
That equaled 2.7 percent of the city’s total budgeted income of $95.5 million from property taxes and non-tax income for the 2014 tax year, including revenue for schools and the county.
In addition to property taxes, the city gets a share of the casino’s gambling revenues. In fiscal 2014, the casino paid the city $1.96 million in rent and percentages of its gambling revenue.
That was down 6.3 percent from fiscal 2013 and 19.5 percent from fiscal 2012, the highwater mark for the casino’s gambling revenue to date and the same year Oxford Casino opened.
The city uses that money and revenue from the downtown tax increment finance district to pay most of the $3 million annual debt service for the Cross Insurance Center Arena, which opened in 2013.
Through its annual budget process, the council decides how much should come from the downtown TIF and how much should come from gambling revenues.
To fund the arena’s construction, which Bangor voters approved via referendum, the city used $12.2 million already received from casino operations and borrowed $56.5 million through a bond issue to cover the total $68.7 million cost.
In fiscal 2014, gaming revenues from the casino covered about 50 percent of the debt service, despite an earlier projection they would cover about 75 percent of the debt service over the 30-year repayment period.
City Manager Cathy Conlow said this week casino revenues were expected to climb 1 to 2 percent annually through the life of the bonds. Instead, they have remained flat or fluctuated slightly in recent years, she said.
“There’s nothing happening that’s terribly unexpected, except that their revenue isn’t increasing,” she said.
According to records maintained by the Maine Gambling Control Board, net gambling income at the Bangor casino has fallen 13.1 percent since hitting its peak in 2012, dropping from $62.7 million to $54.4 million in 2014.
They stabilized somewhat between 2013 and 2014, dropping a lesser $221,164, or 0.4 percent. In comparison, Oxford Casino, which opened in mid-2012, saw a 1.7 percent increase between 2013 and 2014 with net gaming income totaling $72.8 million.
Those do not include nongambling income, such as hotel and food sales. Downtown TIF
For fiscal 2015, the city budgeted $800,000 from the downtown TIF for debt service on the arena. In the proposed 2016 budget, which is still being reviewed by the council, city officials propose dedicating $1 million from the downtown TIF for debt service related to the arena.
The change comes as city officials also propose diverting $255,000 in gambling revenues away from debt service in order to pay for operations of the Cross Center in fiscal 2016.
In her budget letter to the council, Conlow wrote that revenues at the Cross Insurance Center are projected at $2.5 million for fiscal 2016, down 9 percent from the $2.7 million estimate the year before.
She attributed the change to the center’s management, Global Spectrum, having more time to better understand operations and “lower than anticipated revenues in the convention center.”
“Central to this issue is that the market is slow to respond to the costs that premium facilities usually command,” she wrote.
City officials project total expenses at the center will be $2.8 million in fiscal 2016, down about 1 percent from the year before. That leaves a deficit of approximately $299,368, necessitating the proposed shift of gambling funds away from debt service.
The downtown TIF captures all revenue resulting from property value assessment increases since its formation in 2006. In fiscal 2015, that amounted to $112.4 million.
However, in order to mitigate property tax increases for Bangor residents, the City Council reduced the amount captured by the downtown TIF to 65 percent in fiscal 2015 instead of 100 percent of the increased property value. That meant a lesser $73.5 million went into the TIF in fiscal 2015.
According to the city, as of July 30, 2014, the Arena Fund, which includes all gambling funds from the casino and payments for naming rights by Cross Insurance, had a reserve of $1.05 million.
According to city tax records, Hollywood Casino’s properties in Bangor belong to HC Bangor LLC and GLP Capital LP. HC Bangor LLC, which owns the casino’s personal property such as gambling machines and furniture, formed in August 2013 as part of Hollywood Casino, according to state records.
GLP Capital LP is a wholly owned subsidiary of Gaming and Leisure Properties Inc., a real estate investment trust formed in 2013 as a corporate spinoff of Pennsylvania-based Penn National Gaming Inc.
The spinoff enabled Penn National to continue running the casinos while reducing taxes and overcoming casino licensing restrictions by having the real estate investment trust take ownership of roughly half of Penn National’s casino properties, including the Bangor casino.
As publicly traded companies, Penn National and Gaming and Leisure Properties file annual earnings reports with the U.S. Securities and Exchange Commission. According to those reports, Penn National had a net loss attributable to shareholders of $233.2 million in 2014.
Gaming and Leisure Properties had a net income of $185.4 million the same year, according to those reports.
According to an annual report by the national accounting firm RubinBrown LLP, gaming nationwide set a new record in 2014, generating $68.7 billion in revenues.
However, brick-and-mortar casinos, which account for 54.6 percent of all gaming revenues nationally, saw a 0.6 percent decline across the nation.
The accounting firm attributed that decline to increased online gaming and video lottery terminals offered in restaurants, truck stops and bars. Those devices are not allowed in Maine.
Maine was one of eight states to see an increase in commercial gaming revenues, up 0.8 percent to $127.27 million, according to RubinBrown.
Explainer: Drop in Casino Tax Revenue Reflects Industry’s Decline in New Jersey Mark J. Magyar | December 3, 2014 Casino taxes support programs for elderly and disabled, but budgetary impact is limited because state’s casino tax rate is so low
With Showboat, Revel, and Trump Plaza casinos already shut down and Trump Taj Mahal likely to close its doors later this month, most New Jerseyans would not be surprised if Gov. Chris Christie was worried about a sharp decline in casino taxes blowing a giant hole in this year’s state budget.
Christie did call a high-level summit to deal with the future of Atlantic City. But his concern was the city’s future viability as a tourist destination and the 10,000 layoffs caused by the casino closures, not the impact on state casino taxes, which are dedicated to programs for senior citizens and the disabled.
In fact, New Jersey’s casino tax rate is so far below the national average that total casino tax revenues last year made up just $220 million – a miniscule 0.6 percent of the $34.1 billion state budget. The New Jersey State Lottery generates $2.8 billion a year -- 12 times as much as the casino industry did before this year’s closures.
What are New Jersey’s casino taxes? New Jersey levies an 8 percent tax on gross casino revenues, down from a 15 percent tax imposed in 1978 and 1979 during the first two years of casino gambling. Starting in 2004, the state added a $3 per day casino hotel room tax, a $3 per day parking tax, an 8 percent tax on progressive slot machine winnings. The state also added a tax on casino “comps” -- hotel rooms and other services provided on a complimentary basis to customers -- but that tax expired in 2009. A 15 percent tax on Internet gaming revenues was added beginning November 2013.
Are there any other taxes or fiscal obligations casinos have to pay? Yes, since 1984, casinos have had to pay an additional 1.25 percent of gross revenue to the Casino Reinvestment Development Fund to promote the urban revitalization of Atlantic City. The Casino Redevelopment Authority (CRDA) also gets $2.50 out of the parking tax and $1 of the hotel room tax to spend.
So what is New Jersey’s overall casino-tax rate, and how does it compare to other states? New Jersey’s 9.25 percent effective-tax-rate on casino earnings last year was the second lowest in the country after Nevada’s maximum of 7.75 percent, according to the National Conference of State Legislatures.
In contrast, Pennsylvania levies a 55 percent tax that generated $1.384 billion for its state treasury last year -- more than six times as much tax revenue as New Jersey’s casinos on approximately the same earnings. New York State, which is scheduled to grant licenses to four more casinos in the next few years, has an even higher casino-tax rate that ranges from 60 percent to 69 percent. Delaware’s casino-tax rate is 56.23 percent, Maryland charges 67 percent, and Florida and Ohio levy casino taxes at 33 percent.
Why is New Jersey’s casino tax rate so low? From the start, New Jersey required the construction of large casino hotels as a condition for the granting of casino licenses in an effort to turn Atlantic City into a gaming resort destination rivaling Las Vegas. Pennsylvania, Delaware, and other states allowed slot machines to be installed in racetracks (so-called racinos), and other states allowed riverboat gambling and the installation of “one-armed bandits” in bars.
Didn’t New Jersey used to get more than $220 million from casino taxes? Yes, casino taxes rose steadily for years. Casino taxes cracked the $100 million mark in Fiscal Year 1982, passed $200 million in FY1988, hit $300 million in FY1996, and climbed to an all-time high of $413 million in FY2006. With $83 million coming from hotel room taxes, parking taxes, the short-lived tax on casino “comps” and other levies, total casino-tax revenue hit $500 million that year. Since then, as a result of growing competition from Pennsylvania, Delaware, and New York, casino taxes dropped steadily to $329 million in FY2009, $251 million in FY2011 and hit an all-time low of $201 million in FY2013 before rebounding slightly to $207.5 million last year with a boost from Internet gaming. That year, room taxes, parking taxes, and other miscellaneous fees added just $13 million, bringing total FY2014 casino-tax revenue to $220.6 million.
How much are casino revenues likely to decline this year as a result of the closures of Showboat, Revel, Trump Plaza and probably Trump Taj Mahal? No one has laid out any credible projections. The overall casino-tax decline may be relatively small. Caesars shut down Showboat even though the casino was making a profit under the theory that Showboat’s gamblers would migrate to the company’s other Atlantic City casinos. Borgata, the city’s most successful casino, is spending millions of dollars on upgrading its facilities to win a bigger share of Atlantic City’s gaming dollar. State officials are hoping that growth in Internet gaming revenue will more than offset losses in Atlantic City slots and table game revenues -- although Internet gaming growth last year came in far lower than the Christie administration’s original projections.
So what does this mean for the state budget, and for programs for senior citizens and the disabled that casino tax revenues help support? Not much. Even if casino revenues were to drop $50 million -- which is unlikely -- that’s not going to cause a budget crisis. State income tax revenues routinely vary by $100 million from revenue projections, and last spring’s budget crisis was caused by a whopping $700 million shortfall in income tax collections that forced Gov. Chris Christie to cut pension payments by $2.4 billion over two budget years.
The lion’s share of New Jersey casino taxes go to support the Pharmaceutical Assistance for the Aged and Disabled (PAAD) program that subsidizes low-cost prescriptions for senior citizens and disabled residents. But the drop in casino taxes over the past eight years has not resulted in any permanent cuts to the PAAD program. While Christie and the Legislature did make cuts to PAAD in 2010 because of a massive state budget crisis caused by the Great Recession, the PAAD program cuts were restored in full the following year and have been funded ever since, even though casino-tax revenues have continued to fall.
Casino's are the solution to rotting cities. There are only upsides to casinos. - unicorns and rainbows.
An estimated $4.1 million in gaming revenue will be provided to the city and the county. The funding will help decrease the city’s property taxes by 10 percent in three years, according to Schenectady Mayor Gary McCarthy.
Casino's are the solution to rotting cities. There are only upsides to casinos. - unicorns and rainbows.
An estimated $4.1 million in gaming revenue will be provided to the city and the county. The funding will help decrease the city’s property taxes by 10 percent in three years, according to Schenectady Mayor Gary McCarthy.
You and libertarian are a little bit confused .
Casinos are for fun. Like Disneyland- donuts- Hooters for older people- and with a little bit of chain letter thrown in. People go there to have fun. You eat donuts because they taste good. You want donuts to be healthy now ?
Casinos are for fun. Like Disneyland- donuts- Hooters for older people- and with a little bit of chain letter thrown in. People go there to have fun. You eat donuts because they taste good. You want donuts to be healthy now ?
Casinos are not for you !
Not confused...I don't know if you are from Schenectady, but if you are, then you know you don't need to go to a state licensed casino to go gamble.
BTW...A casino isn't like Disneyland or hooters. You don't walk into Disneyland or Hooters hoping to walk out with more money than you walked in with.
I'm not against gambling, stupid people can do what they want with their money. But I'm not going to kid myself into believing that a building with games of chance is going to reduce property taxes or reduce the poverty rate, or increase property values. All it does is swindle money out of people that can afford it, AND from those that can't afford it. It's a fun way to collect taxes.
HA HA HA...what's that, like a Schdy exclusive...only place in the US where you can gamble without having to go to a licensed casino????
I never said only place. But if gambling is a recipe for economic recovery, then there were/are many people in Schenectady doing their part to help the local economy.
That was the sales pitch from the Mayor, but then reality set in...
Baltimore Brew - News and Views in Baltimore
It’s now official: sagging casino revenues equal no property tax cut this year ANALYSIS: The mayor, who promised tax breaks for homeowners from casino revenues, now calls for a "pause" as first-year Horseshoe lease payments tank
People are as likely to visit Schenectady to gamble on a toxic waste site as they are to visit Baltimore to gamble on a toxic waste site.
I never said only place. But if gambling is a recipe for economic recovery, then there were/are many people in Schenectady doing their part to help the local economy.
Oh, now ILLEGAL GAMBLING is helping the local economy...WOW, Sissy world is a wonderful place!!!!!
JUST BECAUSE SISSY SAYS SO DOESN'T MAKE IT SO...BUT HE THINKS IT DOES!!!!! JUST BECAUSE MC1 SAYS SO DOESN'T MAKE IT SO!!!!!
Oh, now ILLEGAL GAMBLING is helping the local economy...WOW, Sissy world is a wonderful place!!!!!
It's really "unlicensed" or "unregulated" gambling. If it was really illegal, the government couldn't allow illegal activity, or in the case of the NYS Lottery, actually run numbers.
It's really "unlicensed" or "unregulated" gambling. If it was really illegal, the government couldn't allow illegal activity, or in the case of the NYS Lottery, actually run numbers.
Because Sissy says it so....Sissy world is a wonderful place!!!!! A world where you can live in gleeful bliss!!!
JUST BECAUSE SISSY SAYS SO DOESN'T MAKE IT SO...BUT HE THINKS IT DOES!!!!! JUST BECAUSE MC1 SAYS SO DOESN'T MAKE IT SO!!!!!
, and $14 million in year five (2019) and thereafter.
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